II. Purpose, Coverage and Overview; “Loan Originator” and ...

Loan Originator (LO) Compensation

II. Purpose, Coverage and Overview; "Loan Originator" and "Compensation" Defined

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Major Components of Rule

Prohibits steering a consumer into a loan that generates greater compensation for the loan originator, unless the consummated loan is in the consumer's interest.

Prohibits loan originator compensation based on the terms of a mortgage transaction or a proxy for a transaction term.

Prohibits dual compensation (i.e., loan originator being compensated by both the consumer and another person, such as a creditor).

Prohibits mandatory arbitration clauses and waivers of certain causes of action.

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FEDERAL DEPOSIT INSURANCE CORPORATION

Major Components of Rule Con't.

Prohibits the financing of credit insurance (this prohibition does not include mortgage insurance).

Requires depository institutions have written policies and procedures.

Imposes qualification requirements on loan originators. Requires name and NMLSR identification information of loan

originator with primary responsibility appear on the credit application, note, and security instrument. Permits, within limits, paying loan originators compensation based on profits derived from a bank's mortgage-related activities. ("bank" includes an affiliate of the bank and/or a business unit within the bank or affiliate).

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FEDERAL DEPOSIT INSURANCE CORPORATION

Key Compensation Prohibition

No loan originator can receive and no person can pay to a loan originator, directly or indirectly...

Compensation in an amount that is based on terms of transactions (or proxies for terms of transactions):

? a single loan originator, or ? multiple loan originators (limited exception: some profits-

based compensation).

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FEDERAL DEPOSIT INSURANCE CORPORATION

Covered Transactions

A covered transaction is a consumerpurpose, closed-end transaction secured by a dwelling, whether by a first or subordinate lien.

It includes reverse mortgages, condominiums, and cooperatives.

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FEDERAL DEPOSIT INSURANCE CORPORATION

Loan originator

Any person who, for or in expectation of compensation or other monetary gain, engages in certain specified activities, including:

Taking an application; Offering particular credit terms, or referring a consumer

to a particular loan originator; or Assisting a consumer in obtaining or applying for a

covered mortgage loan by advising on specific credit terms.

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FEDERAL DEPOSIT INSURANCE CORPORATION

Taking an Application

A person takes an application by:

1. Filling out a consumer application; 2. Inputting the information into an online or

other automated system; or 3. Taking information from the consumer over

the phone to complete the application.

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FEDERAL DEPOSIT INSURANCE CORPORATION

Offering Terms

A person offers terms of a mortgage loan by:

1. Presenting particular credit terms for consideration by a consumer; or

2. Recommending or referring a consumer to a particular loan originator, creditor, credit terms, or credit product (based on information obtained from the consumer).

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FEDERAL DEPOSIT INSURANCE CORPORATION

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